April 24, 2014
Should a Will Even the Score?
Consider this difficult situation: An elderly woman lends her oldest son $20,000 to help pay for some expensive medical care for his teenage son – her grandson – who’s stricken with cancer.
When the woman writes her will, a different son who is also her executor – and happens to be an accountant – advises her to deduct the $20,000 loan, never repaid, from the oldest son’s modest inheritance.
This happened in my family, and I was of two minds at the time. Technically, the money was a loan – not a gift – so not paying it back was unfair to the other siblings who didn’t receive $20,000. But it seemed uncompassionate to take the money out of a bequest, given the graveness of the teenager’s illness.
Financial planner Rick Kahler discusses a similar situation in this video and proposes something that may seem radical: evenly dividing up your estate isn’t necessarily fair.
The way Kahler explains his argument in the video, it makes sense – at least in the particular instance he’s discussing. But does it depend on the situation? …Learn More
April 22, 2014
Job Quality Matters
The nation’s job market regained some of its momentum in March. But it’s not just getting a job that’s key to gaining financial security – it’s about getting and keeping a quality job.
In a recent report, the Institute on Assets and Social Policy at Brandeis University used interviews with workers around the country to identify three aspects of a job – beyond the size of the paycheck – that help people save money and bolster their financial security. [Excerpts from some of the interviews are shown.]
The report also gave some indications of how common it is for workers to go without them:
Benefits – Employer health care, disability insurance, a 401(k) retirement plan with an employer savings match, tuition credits – these benefits help workers save more, shield them against risk, and protect their paychecks by subsidizing some living costs. But the service sector, one of the largest segments of the U.S. labor force, is particularly poor in providing such benefits.
Flexibility – Without sick days and similar arrangements, workers risk losing their jobs due to an illness or unanticipated event. …Learn More
April 17, 2014
Social Security 101
As a young adult starting my career in Chicago in the 1980s, I didn’t have a clue how Social Security worked or why money was being taken out of my scrawny paycheck.
But trust me on this: the Social Security retirement program becomes a lot more interesting to workers as they age and their retirement horizon comes into sharp focus. It affects just about every American – and most of us pay into it.
It is not only the bedrock of retirement for millions of Americans and their spouses, but it’s also a source of income for their survivors, including children, and workers who become disabled.
In this video, officials from the U.S. Social Security Administration explain what its programs do and why they matter. Learn More
April 15, 2014
Marching to Retirement Without a Plan
Only about half of all U.S. workers in the private sector participate in retirement savings plans at their current places of employment, according to a new report by the Center for Retirement Research.
Pension coverage in this country “remains a serious problem,” concludes the Center, which also sponsors this blog.
The goal of the Center’s report is to make sense of the myriad estimates of how many Americans are covered at work. One prominent source of data is the federal government’s survey of employers, the National Compensation Survey. The NCS shows that 78 percent of full-time workers, ages 25 through 64, have some type of defined benefit or defined contribution plan available to them at work.
But that’s the rosiest way to slice the data.
The share of employees who are covered slides to 48 percent when public-sector, often unionized, workers are stripped out of the NCS; when part-time, private-sector workers are added in; and when one counts only the share who actually participate in an employer plan when it’s offered to them. …Learn More
April 10, 2014
Downturns Fuel Bridge Jobs, Retirement
Older workers may have every intention of deciding when they’ll retire, but economic conditions can undermine their well-laid plans.
A new study investigating whether macroeconomic events “leave workers with less control over their retirement timing” found that various transitions from career jobs into retirement sharply accelerated during periods when more Americans, including more older workers, were losing their jobs.
The researchers analyzed whether periods of rising unemployment over the past 50 years have affected three specific retirement transitions made by older workers: 1) from full-time work to “bridge jobs,” which pay less; 2) from bridge jobs to full retirement; and 3) from full-time work to full retirement.
These transitions were tracked based on changes in individuals’ employment earnings documented in U.S. Social Security Administration data from 1960 through 2010. An individual was considered to have shifted to a bridge job after he experienced at least a 50 percent decline in his earnings with an existing or new employer – the earnings floor on this group was $5,000 per year. When earnings fell below $5,000, the worker was considered fully retired.
The researchers said that they focused on white men between the ages of 55 and 75, because their labor force participation patterns were more stable during the period studied than those of women and minorities.
They found that a 1-percentage-point rise in the U.S. unemployment rate increased the number of men moving each year from full-time work to bridge jobs by 7 percent.
Rising unemployment also pushed more men into full retirement. A 1-percentage-point rise in the unemployment rate increased the number of men who retired – either from full-time work or from a bridge job – by 5 percent each. …Learn More
April 8, 2014
1 in 4 Seniors Have Little Home Equity
Retirees can use the equity sitting in their homes to pay for their daily expenses, out-of-pocket medical bills or nursing care, especially toward the end of their lives.
Cash-strapped older retirees can access that equity by taking out reverse mortgages or home equity loans or by downsizing to less expensive homes or condominiums.
But one in four Medicare recipients has less than $12,250 in home equity, according to a new report by the Kaiser Family Foundation, a healthcare non-profit.
Kaiser’s calculations also show that the distribution of home equity among older Americans is – like the distribution of income and financial assets – top heavy. While 5 percent of Medicare beneficiaries in 2013 had more than $398,500 in home equity, half have less than $66,700.
According to Kaiser’s projections, that gap will widen in the future. By 2030, those whose home equity places them in the top 5 percent will see that equity grow more than 40 percent, but it will rise less than 10 percent for those with mid-level – or median – amounts of equity.
The analysis was part of a study to examine the ability of older Americans to absorb rising out-of-pocket retiree medical costs and increasing Medicare premiums. This blog also reported the study’s similarly grim findings about the meager financial savings held by many retirees to cover their health care costs.Learn More
April 3, 2014
1 in 4 Seniors Have Meager Savings
Less than $11,300 – that’s how little savings one-quarter of all Medicare beneficiaries have in their 401(k)s, IRAs, and other financial accounts.
This grim statistic comes out of a report by the Kaiser Family Foundation, a health care and policy non-profit. Kaiser’s goal was to gauge whether older Americans will be able to absorb rising Medicare premiums, co-pays, deductibles and related costs.
“Most people on Medicare are of modest means with relatively low incomes, low savings and low home equity,” concluded Gretchen Jacobson, the foundation’s associate director of the Medicare policy program and lead author of the report.
When retirees’ incomes can’t cover their out-of-pocket costs, they need money in the bank to pay for care. But half of all Medicare beneficiaries have annual incomes below $23,500 and have less than $61,400 in the bank – less than the cost of a year in a nursing home – Kaiser said.
The foundation’s report also projects beneficiary incomes and wealth over the next two decades, as baby boomers age: much of the growth in incomes and wealth will be skewed toward individuals in the higher income and wealth brackets.
This report should “raise questions about the extent to which the next generation of Medicare beneficiaries will be able to bear a larger share of costs,” Kaiser said.Learn More